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An intertemporal carbon emissions trading system with cap adjustment and path control

Author

Listed:
  • Minxing Jiang
  • Bangzhu Zhu
  • Yi-Ming Wei
  • Julien Chevallier

    (LED - Laboratoire d'Economie Dionysien - UP8 - Université Paris 8)

  • Kaijian He

Abstract

Cap adjustment with shocks and cost-effectiveness in cap-and-trade system has been an area of concern for regulators. By a simple two-period model of such system with banking and borrowing, we examine how emission reduction technological changes affect the cap in three cases (i.e. pure flow externality, pure stock externality and mixed externality), and identify the efficiency properties in such system with banking and borrowing. We show that the effects of technological changes on cap are negative in both pure flow and pure stock externality cases. In the mixed externality case, the effects are uncertain, which depend on the decayed rate of CO2 stock, the discounted rate and functions of marginal abatement costs and marginal damage. In general cases, the social optimum is not attainable via the cap-and-trade system, since firms sub-optimally distribute emissions across periods. In a particular case if the ratio of marginal damage in Period 1 to the discounted marginal damage in Period 2 is exactly equal to the decayed rate, the decentralized emissions of firms will lead to the social optimum. Finally, a hybrid quantity-price policy is proposed to rectify the paths of firms to be socially desirable with an effective quantity control.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Minxing Jiang & Bangzhu Zhu & Yi-Ming Wei & Julien Chevallier & Kaijian He, 2018. "An intertemporal carbon emissions trading system with cap adjustment and path control," Post-Print halshs-04250186, HAL.
    • Handle: RePEc:hal:journl:halshs-04250186
    DOI: 10.1016/j.enpol.2018.07.025
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    Cited by:

    1. Li, Zhimin & Pan, Yanchun & Yang, Wen & Ma, Jianhua & Zhou, Ming, 2021. "Effects of government subsidies on green technology investment and green marketing coordination of supply chain under the cap-and-trade mechanism," Energy Economics, Elsevier, vol. 101(C).
    2. Kangkang Zhang & Deyi Xu & Shiran Li & Na Zhou & Jinhui Xiong, 2019. "Has China’s Pilot Emissions Trading Scheme Influenced the Carbon Intensity of Output?," IJERPH, MDPI, vol. 16(10), pages 1-18, May.
    3. Tang, Ling & Wang, Haohan & Li, Ling & Yang, Kaitong & Mi, Zhifu, 2020. "Quantitative models in emission trading system research: A literature review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 132(C).
    4. Lu, Tinghui & Li, Xuelian & Lin, Jyh-Horng & Chang, Ching-Hui & Cai, Zhantong, 2024. "Assessing the impact of climate policies on equity risk under sustainable insurance: Cap-and-trade regulation, energy-saving technology subsidies, and carbon tariffs," Energy Economics, Elsevier, vol. 139(C).
    5. Ying Tung Chan, 2019. "Optimal Environmental Tax Rate in an Open Economy with Labor Migration—An E-DSGE Model Approach," Sustainability, MDPI, vol. 11(19), pages 1-38, September.
    6. Chen, Xing & Lin, Boqiang, 2021. "Towards carbon neutrality by implementing carbon emissions trading scheme: Policy evaluation in China," Energy Policy, Elsevier, vol. 157(C).
    7. Wen Jiang & Wenfei Lu & Qianwen Xu, 2019. "Profit Distribution Model for Construction Supply Chain with Cap-and-Trade Policy," Sustainability, MDPI, vol. 11(4), pages 1-24, February.

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